Geely chief aims high with Volvo

Li now planned to set up three new Volvo plants on the mainland with a combined capacity of 300,000 cars per year, he told The Wall Street Journal in an interview.Li also said he planned to develop more luxury models under the Swedish marque. "Current Volvo cars like the S80 sedan could go up against the BMW 5-series but they have not reached the sophistication of the [more upscale] BMW 7-series or the Mercedes S-Class," Li told the paper." Li now planned to set up three new Volvo plants on the mainland with a combined capacity of 300,000 cars per year, he told The Wall Street Journal in an interview.Li also said he planned to develop more luxury models under the Swedish marque. "Current Volvo cars like the S80 sedan could go up against the BMW 5-series but they have not reached the sophistication of the [more upscale] BMW 7-series or the Mercedes S-Class," Li told the paper.These hugely ambitious targets would kick both the Swedish firm and its Chinese parent company into overdrive, pitting privately held Zhejiang Geely against the likes of Volkswagen's Audi, Daimler's Mercedes-Benz and BMW, the three German carmakers that have come to dominate the increasingly competitive high end of the mainland's roaring vehicle market."Compared to these German companies, Volvo's brand equity is lagging in the mainland market," said one industry analyst who declined to be named. "It is also hard to say whether Chinese consumers would take to buying luxury cars made by a company that is locally owned."Volvo sold only about 17,000 cars in China in the first seven months of this year, up 56 per cent on a low base from a year earlier, according to data from JD Power and Associates. About half of the Swedish brand's sales were imports, the rest were assembled locally from kits by a joint venture between Changan, Ford and Mazda.By contrast, Audi, Mercedes and BMW accounted for nine of the top 10 selling luxury cars in the year so far. Combined sales of the three German brands rose about 74 per cent in the first seven months to more than 271,000 cars.Li's 300,000-car target would be a lot of Volvos for China, and for Zhejiang Geely. Worldwide, Volvo sold only 324,000 cars last year and booked an adjusted pre-tax loss of US$662 million, according to Ford's stock exchange filings. Zhejiang Geely sold 329,000 cars last year under its homegrown Eagle, Maple, Englon and Emgrand brands. Li told the Journal he was considering building new plants to make Volvos in Daqing city in the northeast, Jiading in suburban Shanghai, and would also likely take over an existing car factory in Chengdu, Sichuan province, confirming months of mainland press speculation.The local governments of Daqing, an oil-producing town in Heilongjiang province, and Jiading district together contributed 4 billion yuan (HK$4.6 billion) in financing to help Zhejiang Geely foot the bill for the Volvo buyout, according to Ford's filings to the US Securities and Exchange Commission.Li did not mention a timeline for launching production at the new Volvo plants or say how their construction - which some analysts reckon could cost more than 5 billion yuan - would be funded."
Mainland car tycoon Li Shufu's ambitions come in two sizes - big and bigger. It was a big move when Li's Zhejiang Geely Holding Group bought Volvo from Ford Motor last month for US$1.5 billion in a deal partly financed by local mainland governments. The next step, if Li gets his way, will see Zhejiang Geely making more Volvos in China than Geelys.
Li now planned to set up three new Volvo plants on the mainland with a combined capacity of 300,000 cars per year, he told The Wall Street Journal in an interview.
Li also said he planned to develop more luxury models under the Swedish marque. "Current Volvo cars like the S80 sedan could go up against the BMW 5-series but they have not reached the sophistication of the [more upscale] BMW 7-series or the Mercedes S-Class," Li told the paper.
These hugely ambitious targets would kick both the Swedish firm and its Chinese parent company into overdrive, pitting privately held Zhejiang Geely against the likes of Volkswagen's Audi, Daimler's Mercedes-Benz and BMW, the three German carmakers that have come to dominate the increasingly competitive high end of the mainland's roaring vehicle market.
"Compared to these German companies, Volvo's brand equity is lagging in the mainland market," said one industry analyst who declined to be named. "It is also hard to say whether Chinese consumers would take to buying luxury cars made by a company that is locally owned."
Volvo sold only about 17,000 cars in China in the first seven months of this year, up 56 per cent on a low base from a year earlier, according to data from JD Power and Associates. About half of the Swedish brand's sales were imports, the rest were assembled locally from kits by a joint venture between Changan, Ford and Mazda.
By contrast, Audi, Mercedes and BMW accounted for nine of the top 10 selling luxury cars in the year so far. Combined sales of the three German brands rose about 74 per cent in the first seven months to more than 271,000 cars.
Li's 300,000-car target would be a lot of Volvos for China, and for Zhejiang Geely. Worldwide, Volvo sold only 324,000 cars last year and booked an adjusted pre-tax loss of US$662 million, according to Ford's stock exchange filings. Zhejiang Geely sold 329,000 cars last year under its homegrown Eagle, Maple, Englon and Emgrand brands.
Li told the Journal he was considering building new plants to make Volvos in Daqing city in the northeast, Jiading in suburban Shanghai, and would also likely take over an existing car factory in Chengdu, Sichuan province, confirming months of mainland press speculation.
The local governments of Daqing, an oil-producing town in Heilongjiang province, and Jiading district together contributed 4 billion yuan (HK$4.6 billion) in financing to help Zhejiang Geely foot the bill for the Volvo buyout, according to Ford's filings to the US Securities and Exchange Commission.
Li did not mention a timeline for launching production at the new Volvo plants or say how their construction - which some analysts reckon could cost more than 5 billion yuan - would be funded.